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Saurashtra Gramin Bank NPA Management Policy Page 1 of 36
SAURAShTRA GRAMIN BANK
NPA MANAGEMENT POLICY
CONTENTS OF BANK’S NPA MANAGEMENT POLICY
Sr. Details
1 Introduction
2 Objectives of the Policy
3 Definitions
4 Income Recognition
5 Asset Classification
6 NPA Management – Requirement of Effective Mechanism and Granular
Data
7 Quick Mortality
8 Review and Management of Stressed Assets (SMAs, NPAs and AUCs)
9 Recovery through compromise with borrower
10 Recovery through Legal Process
11 Writing Off of Bad Debts
12 Budgeting for NPA Management and AUC Recovery
13 Staff Accountability
14 Guidelines for Compromise settlement of dues of the Bank though Lok
Adalats
15 Disposal of assets in NPA A/c. under decree
16 Appropriation of recovery in NPAs
17 Other Relevant Policies
18 Review of NPA position to the Board
19 Annexure - 1 Warning Signals
Annexure – 2 Stressed Asset Review Report : Category I & II SMAs and Sub-standard Assets
Annexure – 3 Stressed Assets Review : Progress Report for the month ended (To be submitted in duplicate)
Annexure – 4 Relief and concessions which can be extended To potential viable units. under rehabilitation
Annexure – 5 Profile of individual NPA accounts (Doubtful/ Loss) and AUC Accounts with outstanding of Rs.3.00 lacs and above
Saurashtra Gramin Bank NPA Management Policy Page 2 of 36
NPA MANAGEMENT POLICY
1. INTRODUCTION:
NPA Management has great significance in the present day banking. Banking
sector reforms & IRAC guidelines of RBI over the period of more than one and a
half decade, has brought about change in the loan asset management system. It
has specifically directed banks not only to maintain good quality of their assets
but also to retrieve the deteriorated loan with massive efforts. Infect, in a banking
company, the NPA management begins from the very day when borrower is
identified. Management of all levels has to keep a close watch on each loan
account on an almost day-to-day basis so that it does not turn out to be NPA.
Even then, occurrence of NPA can not be altogether eliminated; it can be well
controlled with concerted and focused attention by all especially the branch
functionary. When the loan goes bad, a series of avenues are available for bank to
retrieve such account and bring it back to performing track. In cases where
retrieval is not possible, legal actions become imminent. In short, the efficacy of
NPA Management depends much on efficiency of the operational staff, quick
decisions at appropriate time strong supervision and control systems of the bank.
With this background in mind, we have framed the NPA Management policy of
our bank.
Saurashtra Gramin Bank‟s (SGB) NPA Management Policy (NMP) seeks to lay
down the Bank‟s policy on management and recovery of non performing
assets (NPAs), and proactive initiatives to prevent slippages in asset portfolio.
The aim of the policy is to maintain NPAs of Bank at minimum.
2. Objectives of the Policy
2.1. The basic objectives of the policy are to lay down a system for management
of NPAs and to develop the system into an effective tool to contain NPAs
within prudential limits.
2.2. The policy outlines the strategies to meet the goals in tune with RBI
directives, loan Policy and other instructions received from SBI /NABARD,
etc. on the subject.
2.3. The Policy lays stress on a system of early identification and reporting of all
existing and potential; Special Mention Accounts (SMA) as a first step
towards management of NPAs.
2.4. Preventive & timely corrective actions are of prime importance in
management of NPAs. Therefore, the policy proposes to have special thrust
on loan review mechanism, which will be on the lookout for early warning
Saurashtra Gramin Bank NPA Management Policy Page 3 of 36
signals to ensure effective and expeditious corrective measures. Time
norms are stipulated for identification and analysis of “Special Mention
Accounts” to be followed by prompt corrective actions.
2.5. The policy lay down a broad approach for recovery of NPAs through
various methods & finally through compromise settlement.
3. DEFINITIONS
3.1. Non Performing Assets
3.1.1. An asset, including a leased asset, becomes non performing when it
ceases to generate income for the bank.
3.1.2. A non performing asset (NPA) is a loan or an advance where;
i. interest and/ or installment of principal remain overdue for
a period of more than 90 days in respect of a term loan,
ii. the account remains „out of order‟ as indicated at paragraph
3.2 below, in respect of an Overdraft/Cash Credit (OD/CC),
iii. the bill remains overdue for a period of more than 90 days in
the case of bills purchased and discounted,
iv. the installment of principal or interest thereon remains
overdue for two crop seasons for short duration crops,
v. the installment of principal or interest thereon remains
overdue for one crop season for long duration crops,
vi. the amount of liquidity facility remains outstanding for more
than 90 days, in respect of a securitisation transaction
undertaken in terms of guidelines on securitisation dated
February 1, 2006.
vii. in respect of derivative transactions, the overdue receivables
representing positive mark-to-market value of a derivative
contract, if these remain unpaid for a period of 90 days from
the specified due date for payment.
3.1.3. In case of interest payments, banks should, classify an account as NPA
only if the interest due and charged during any quarter is not serviced
fully within 90 days from the end of the quarter.
In addition, an account may also be classified as NPA in as per
guidelines issued by RBI time to time.
Saurashtra Gramin Bank NPA Management Policy Page 4 of 36
3.2. ‘Out of Order’ status
An account should be treated as 'out of order' if the outstanding balance
remains continuously in excess of the sanctioned limit/drawing power for 90
days. In cases where the outstanding balance in the principal operating
account is less than the sanctioned limit/drawing power, but there are no
credits continuously for 90 days as on the date of Balance Sheet or credits are
not enough to cover the interest debited during the same period, these
accounts should be treated as 'out of order'.
3.3. ‘Overdue’
Any amount due to the bank under any credit facility is „overdue‟ if it is not
paid on the due date fixed by the bank.
4. INCOME RECOGNITION
4.1. Income Recognition Policy
4.1.1. The policy of income recognition has to be objective and based on the
record of recovery. Internationally income from non-performing assets
(NPA) is not recognised on accrual basis but is booked as income only
when it is actually received. Therefore, the bank should not charge and
take to income account interest on any NPA. This will apply to
Government guaranteed accounts also.
4.1.2. However, interest on advances against Term Deposits, National
Savings Certificates (NSCs), Indira Vikas Patras (IVPs), Kisan Vikas
Patras (KVPs) and Life policies may be taken to income account on the
due date, provided adequate margin is available in the accounts.
4.1.3. Fees and commissions earned by the banks as a result of renegotiations
or rescheduling of outstanding debts should be recognised on an accrual
basis over the period of time covered by the renegotiated or rescheduled
extension of credit.
4.2. Reversal of income
4.2.1. If any advance, including bills purchased and discounted, becomes
NPA, the entire interest accrued and credited to income account in the
past periods, should be reversed if the same is not realised. This will
apply to Government guaranteed accounts also.
4.2.2. In respect of NPAs, fees, commission and similar income that have
accrued should cease to accrue in the current period and should be
reversed with respect to past periods, if uncollected.
Saurashtra Gramin Bank NPA Management Policy Page 5 of 36
4.2.3. Leased Assets
The finance charge component of finance income [as defined in „AS 19
Leases‟ issued by the Council of the Institute of Chartered Accountants of
India (ICAI)] on the leased asset which has accrued and was credited to
income account before the asset became non performing, and remaining
unrealised, should be reversed or provided for in the current accounting
period.
4.3. Appropriation of recovery in NPAs
4.3.1. Interest realised on NPAs may be taken to income account provided
the credits in the accounts towards interest are not out of fresh/
additional credit facilities sanctioned to the borrower concerned.
4.3.2. In the absence of a clear agreement between the bank and the borrower
for the purpose of appropriation of recoveries in NPAs (i.e. towards
principal or interest due), bank should adopt an accounting principle and
exercise the right of appropriation of recoveries in a uniform and
consistent manner.
4.4. Interest Application
On an account turning NPA, bank should reverse the interest already
charged and not collected by debiting Profit and Loss account, and
stop further application of interest. However, bank may continue to
record such accrued interest in a Memorandum account in their books.
For the purpose of computing Gross Advances, interest recorded in the
Memorandum account should not be taken into account.
4.5. Computation of NPA levels
Compute of Gross Advances, Net Advances, Gross NPAs and Net
NPAs are as per the RBI guidelines.
5. ASSET CLASSIFICATION
5.1. Categories of NPAs
It is required to classify non performing assets further into the following three
categories based on the period for which the asset has remained non
performing and the realisability of the dues:
i. Substandard Assets
ii. Doubtful Assets
iii. Loss Assets
5.1.1. Substandard Assets
With effect from March 31, 2005, a substandard asset would be one, which has
remained NPA for a period less than or equal to 12 months. Such an asset will
Saurashtra Gramin Bank NPA Management Policy Page 6 of 36
have well defined credit weaknesses that jeopardise the liquidation of the
debt and are characterised by the distinct possibility that the banks will
sustain some loss, if deficiencies are not corrected.
5.1.2. Doubtful Assets
With effect from March 31, 2005, an asset would be classified as doubtful if it
has remained in the substandard category for a period of 12 months. A loan
classified as doubtful has all the weaknesses inherent in assets that were
classified as sub-standard, with the added characteristic that the weaknesses
make collection or liquidation in full, – on the basis of currently known facts,
conditions and values – highly questionable and improbable.
5.1.3. Loss Assets
A loss asset is one where loss has been identified by the bank or internal or
external auditors or the RBI inspection but the amount has not been written
off wholly. In other words, such an asset is considered uncollectible and of
such little value that its continuance as a bankable asset is not warranted
although there may be some salvage or recovery value.
5.2. Guidelines for classification of assets
5.2.1. Broadly speaking, classification of assets into above categories should
be done taking into account the degree of well-defined credit weaknesses
and the extent of dependence on collateral security for realisation of
dues.
5.2.2. Accounts with temporary deficiencies
The classification of an asset as NPA should be based on the record of
recovery. Bank should not classify an advance account as NPA merely
due to the existence of some deficiencies which are temporary in nature
such as non-availability of adequate drawing power based on the latest
available stock statement, balance outstanding exceeding the limit
temporarily, non-submission of stock statements and non-renewal of the
limits on the due date, etc. In the matter of classification of accounts with
such deficiencies bank may follow the following guidelines:
i) Bank should ensure that drawings in the working capital accounts are
covered by the adequacy of current assets, since current assets are first
appropriated in times of distress. Drawing power is required to be
arrived at based on the stock statement which is current. However,
considering the difficulties of large borrowers, stock statements relied
upon by the banks for determining drawing power should not be older
than three months. The outstanding in the account based on drawing
power calculated from stock statements older than three months, would
be deemed as irregular.
Saurashtra Gramin Bank NPA Management Policy Page 7 of 36
A working capital borrowal account will become NPA if such irregular
drawings are permitted in the account for a continuous period of 90 days
even though the unit may be working or the borrower's financial position
is satisfactory.
ii) Regular and ad hoc credit limits need to be reviewed/ regularised not
later than three months from the due date/date of ad hoc sanction. In
case of constraints such as non-availability of financial statements and
other data
from the borrowers, the branch should furnish evidence to show that
renewal/ review of credit limits is already on and would be completed
soon. In any case, delay beyond six months is not considered desirable as
a general discipline. Hence, an account where the regular/ ad hoc credit
limits have not been reviewed/ renewed within 180 days from the due
date/ date of ad hoc sanction will be treated as NPA.
5.2.3. Upgradation of loan accounts classified as NPAs
If arrears of interest and principal are paid by the borrower in the case of
loan accounts classified as NPAs, the account should no longer be treated
as non-performing and may be classified as „standard‟ accounts.
5.2.4. Accounts regularised near about the balance sheet date
The asset classification of borrowal accounts where a solitary or a few
credits are recorded before the balance sheet date should be handled
with care and without scope for subjectivity. Where the account indicates
inherent weakness on the basis of the data available, the account should
be deemed as a NPA. In other genuine cases, the bank must furnish
satisfactory evidence to the Statutory Auditors/Inspecting Officers about
the manner of regularisation of the account to eliminate doubts on their
performing status.
5.2.5. Asset Classification to be borrower-wise and not facility-wise
i) It is difficult to envisage a situation when only one facility to a
borrower/one investment in any of the securities issued by the borrower
becomes a problem credit/investment and not others. Therefore, all the
facilities granted by a bank to a borrower and investment in all the
securities issued by the borrower will have to be treated as NPA/NPI and
not the particular facility/investment or part thereof which has become
irregular.
ii) If the debits arising out of devolvement of letters of credit or invoked
guarantees are parked in a separate account, the balance outstanding in
Saurashtra Gramin Bank NPA Management Policy Page 8 of 36
that account also should be treated as a part of the borrower‟s principal
operating account for the purpose of application of prudential norms on
income recognition, asset classification and provisioning.
iii) The bills discounted under LC favoring a borrower may not be
classified as a Non-performing assets (NPA), when any other facility
granted to the borrower is classified as NPA. However, in case documents
under LC are not accepted on presentation or the payment under the LC
is not made on the due date by the LC issuing bank for any reason and
the borrower does not immediately make good the amount disbursed as a
result of discounting of concerned bills, the outstanding bills discounted
will immediately be classified as NPA with effect from the date when the
other facilities had been classified as NPA.
5.2.6. Advances under Consortium Arrangements
Asset classification of accounts under consortium should be based on the
record of recovery of the individual member banks and other aspects
having a bearing on the recoverability of the advances. Where the
remittances by the borrower under consortium lending arrangements are
pooled with one bank and/or where the bank receiving remittances is
not parting with the share of other member banks, the account will be
treated as not serviced in the books of the other member banks and
therefore, be treated as NPA. The banks participating in the consortium
should, therefore, arrange to get their share of recovery transferred from
the lead bank or get an express consent from the lead bank for the
transfer of their share of recovery, to ensure proper asset classification in
their respective books.
5.2.7. Accounts where there is erosion in the value of security/frauds
committed by borrowers
i) In respect of accounts where there are potential threats for recovery on
account of erosion in the value of security or non-availability of
security and existence of other factors such as frauds committed by
borrowers it will not be prudent that such accounts should go through
various stages of asset classification. In cases of such serious credit
impairment, the asset should be straightaway classified as doubtful or
loss asset as appropriate:
a. Erosion in the value of security can be reckoned as significant when
the realisable value of the security is less than 50 per cent of the value
assessed by the bank. Such NPAs may be straightaway classified under
doubtful category.
Saurashtra Gramin Bank NPA Management Policy Page 9 of 36
b. If the realisable value of the security, as assessed by the bank/
approved valuers/ RBI is less than 10 per cent of the outstanding in the
borrowal accounts, the existence of security should be ignored and the
asset should be straightaway classified as loss asset.
ii) Provisioning norms in respect of all cases of fraud:
a. The entire amount due to the bank (irrespective of the quantum of
security held against such assets), or for which the bank is liable
(including in case of deposit accounts), is to be provided for over a
period not exceeding four quarters commencing with the quarter in
which the fraud has been detected;
b. However, where there has been delay, beyond the prescribed
period, in reporting the fraud to the Reserve Bank, the entire
provisioning is required to be made at once.
5.2.8. Advances against Term Deposits, NSCs, KVPs/IVPs, etc.
Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs
and life policies need not be treated as NPAs, provided adequate margin
is available in the accounts. Advances against gold ornaments,
government securities and all other securities are not covered by this
exemption.
5.2.9. Loans with moratorium for payment of interest
i. In the case of bank finance given for industrial projects or for
agricultural plantations etc. where moratorium is available for payment
of interest, payment of interest becomes 'due' only after the moratorium
or gestation period is over. Therefore, such amounts of interest do not
become overdue and hence do not become NPA, with reference to the
date of debit of interest. They become overdue after due date for
payment of interest, if uncollected.
ii. In the case of housing loan or similar advances granted to staff
members where interest is payable after recovery of principal, interest
need not be considered as overdue from the first quarter onwards. Such
loans/advances should be classified as NPA only when there is a default
in repayment of instalment of principal or payment of interest on the
respective due dates.
Saurashtra Gramin Bank NPA Management Policy Page 10 of 36
5.2.10. Agricultural advances
i. A loan granted for short duration crops will be treated as NPA, if the
installment of principal or interest thereon remains overdue for two
crop seasons. A loan granted for long duration crops will be treated as
NPA, if the installment of principal or interest thereon remains
overdue for one crop season. For the purpose of these guidelines, “long
duration” crops would be crops with crop season longer than one year
and crops, which are not “long duration” crops, would be treated as
“short duration” crops. The crop season for each crop, which means
the period up to harvesting of the crops raised, would be as
determined by the State Level Bankers‟ Committee in each State.
Depending upon the duration of crops raised by an agriculturist, the
above NPA norms would also be made applicable to agricultural term
loans availed by him.
ii. Where natural calamities impair the repaying capacity of agricultural
borrowers for the purposes specified RBI, bank may decide on own as
a relief measure conversion of the short-term production loan into a
term loan or re-schedulement of the repayment period; and the
sanctioning of fresh short-term loan, subject to guidelines of RBI.
iii. In such cases of conversion or re-schedulement, the term loan as well
as fresh short-term loan may be treated as current dues and need not
be classified as NPA. The asset classification of these loans would
thereafter be governed by the revised terms & conditions and would be
treated as NPA if interest and/or installment of principal remains
overdue for two crop seasons for short duration crops and for one crop
season for long duration crops. For the purpose of these guidelines,
"long duration" crops would be crops with crop season longer than one
year and crops, which are not 'long duration" would be treated as
"short duration" crops.
iv. While fixing the repayment schedule in case of rural housing advances
granted to agriculturists under Indira Awas Yojana and Golden Jubilee
Rural Housing Finance Scheme, the interest/installment payable on
such advances may be linked to crop cycles.
6. NPA Management – Requirement of Effective Mechanism and Granular
Data
(i) Asset quality of bank is one of the most important indicators of their
financial health. Bank should, therefore put in place a robust MIS
mechanism for early detection of signs of distress at individual account
Saurashtra Gramin Bank NPA Management Policy Page 11 of 36
level as well as at segment level (asset class, industry, geographic, size,
etc.). Such early warning signals should be used for putting in place an
effective preventive asset quality management framework, including a
transparent restructuring mechanism for viable accounts under distress
within the prevailing regulatory framework, for preserving the
economic value of those entities in all segments.
(ii) The banks' IT and MIS system should be robust and able to
generate reliable and quality information with regard to their asset
quality for effective decision making. There should be no
inconsistencies between information furnished under regulatory /
statutory reporting and the banks' own MIS reporting. Bank should
also have system generated segment wise information on non-
performing assets and restructured assets which may include data on
the opening balances, additions, reductions (upgradations, actual
recoveries, write-offs etc.), closing balances, provisions held, technical
write-offs, etc.
7. QUICK MORTALITY (Quick mortality are those account which becomes
NPA within 24 months from day of sanction )
7.1. It is obligatory on every person concerned to appraise the proposal with
due care, take necessary steps to ensure that the borrower comply with all
the terms of sanction, appropriate end-use of funds, adequate and close
monitoring of accounts, etc., so that quality of advance account does not
deteriorate. However, instances of quick mortality have thrown light on
inadequacy of proper care at various stages of the loan, viz. Pre-sanction
Appraisal, Post-sanction Monitoring, etc.
7.2. Branches shall take sufficient and utmost care in case of all new advances
accounts, so that they do not become cases of quick mortality and extant
guidelines with regard to compliance of terms and conditions should be
strictly adhered to.
7.3. The Staff accountability should examined immediately on an account
turning into NPA in cases of quick Mortality. However the competent
authority may order examination of the staff accountability at any stage, if
he/she deems necessary.
Saurashtra Gramin Bank NPA Management Policy Page 12 of 36
8. Review and Management of Stressed Assets (Special Mention Accounts
(SMAs) , NPAs and AUCs)
A. Integrate approach to review and management of stressed assets
(SMAs, NPAs and AUCs)
B. Modified approach to rehabilitation / Restructuring-Holding on
operations and reliefs / concessions.
8.1. With a view to streamline the multiple review processes and to integrate
the Bank‟s approach to management of stressed assets including their
restructuring, following guidelines should be followed as new integrated
approach.
8.2. The new integrated approach, being detailed herein, would supersede all
existing instructions on review of problem loans / SMAs/ NPAs(including
AUCs) and such review would here after comprise two separate tracks as
under;
i. Review of stressed assets (SMAs and substandard assets)
with focus on restructuring of loans to viable unit
wherever feasible
ii. Review of Doubtful / Loss assets and AUCs with focus on
quick recovery action.
8.3. Special Mention Accounts (SMAs) : Definition
As per Bank‟s extant approach, the following two categories of
accounts have been designated as SMAs :
i. Category - I :
Accounts where interest / installment has not been
serviced for 30 days. (IRAC Status 2 or 3 in CBS System)
ii. Category – II :
Accounts which are not in default but are showing early
warning signals such as frequent return of cheques,
deteriorating financials, etc. ( An illustrative list of warning
signals as advised by RBI is given in Annexure-I)
8.4. Stressed Assets Review (SAR)
i. Coverage :
SAR would cover loan assets which have the potential for
quick turn around, i.e. SMAs, (category-I & II) and sub
standard assets.
ii. Cut-off :
Rs. 3.00 lacs and above (outstanding)
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(Accounts below the cut-off level will not be covered by the
structured reporting norms and also related guidelines on
holding on operation etc. However, in these cases,
Branches would formulate and pursue account specific
action plans, with the approval of the sanctioning
authority. In addition, a report on all stressed account
above Rs. 1.00 lac but below Rs. 3.00 lacs may be submitted
monthly, on a consolidated basis by the branches to the
controllers / Regional Manager. The Regional Manger /
controllers may also put in place a suitable mechanism for
review of these accounts (Rs. 1.00 lac to Rs. 3.00 lacs) taking
into account the local requirements.)
iii. Stressed Assets Review Report (SAR Report)
The basic strategy underlying the Bank‟s approach to
restructuring would be to initiate appropriate corrective
actions at the right time. Soon after an account is identified
as SMA or an account turns sub-standard, the branch
should take immediate steps to analyse the problems based
on fact and circumstances by means of a review at the
branch as per SAR Report format given in Annexure-2.
Such reports are to be submitted to reviewing authority as
detailed later.
The important parameters of the branch level review
would be following:
a. Diagnose reasons for the account being identified as SMA
/ deterioration in asset quality.
b. Revalidate the assumptions made at time of credit: actions
particularly in regard to assessment of credit risk.
c. Verify completeness and correctness of documentation
including revival position, creation / registration of
charges, insurance cover etc and rectify deficiencies, if any.
d. Discuss the unit‟s problems with the promoters /
guarantors and find out whether they have a future plan
for the unit.
e. Identity and study the existing, primary and secondary
sources of cash flow and determine whether the unit is
intrinsically viable.
f. Determine whether the problems faced by the unit are of a
temporary nature or whether any proactive action from the
Bank is required to sustain its viability.
g. Assess whether the promoter(s) / management has
genuine intent to rehabilitate the unit.
h. Assess the ability of the promoters / management to turn
around the unit.
Saurashtra Gramin Bank NPA Management Policy Page 14 of 36
After taking a view on the, viability of the unit /
feasibility of restructuring, the branch should also decide
on the need to immediately put the unit on “holding on
operations”. If the branch is satisfied that the unit needs to
be put on holding on operations, pending finalization and
implementation of the restructuring package, the branch
may extend the same immediately as detailed later in Para
8.5. No separate approval would be required for extending
the same.
iv. Organizational set for up the stressed assets review
At the Regional Office level, Administrative Officer, Credit
(AO(Credit)) will be Nodal Officer for handling SMAs and
NPAs.
As SAR report from branches would be account-wise, the
reports would continue to flow to the respective
departments depending upon whether the A/c is SMA or
sub-standard. However, Administrative Officer, Credit
(AO(Credit)) is a nodal officer at the R.O. as a single point
of contract for all stressed assets related matters. The nodal
officer would also handle all related correspondence with
the R.O., under overall supervision of Regional Manager.
v. Reviewing Authority :
The SAR Report would be submitted by the branch to the
controllers at monthly intervals. The reports would
thereafter be reviewed by the following authorities;
Brno. To be Monitored
by
Cut off point for accounts with
Outstanding of
01 Branch Manager * Account upto Rs. 3.00 lacs
02 Regional Manager Above Rs. 3.00 lacs and upto
10.00 lacs
03 General Manager Above Rs. 10.00 lacs and upto
20.00 lacs
04 Chairman Above Rs. 20.00 lacs
*This will not be a part of structured reporting and after
reviewing such accounts at branch level, a consolidated
quarterly report will have to be submitted to the respective
controllers as per format prescribed by Competent Authority
time to time. While accounts above Rs. 3.00 lacs report (SARR)
will have to be submitted to the respective controllers. For
Saurashtra Gramin Bank NPA Management Policy Page 15 of 36
monitoring by General Manager, Regional Manager will send
SAR, with his observations & action plan to Head Office, after
receiving from branches. While accounts above Rs. 10.00 lacs for
reviewing purpose, branch will have to submit to Region Office
& Region Office will submit the same to Head Office with their
observations and recommendation to the Head Office.
vi. Action by the reviewing authority :
The reviewing authority would take the SAR Report on
record and give necessary directions to the branch on the
recommended action plan. If the unit is considered
intrinsically viable and if the reviewing authority concurs
with the branch views in this regard, the holding on
operations already Initiated by the branch would continue
and the branch would proceed with the action plan, subject
to directions of the reviewing authority. The purpose of the
structured review is only to examine the viability and
approve the action plan for proceeding with restructuring
/ rephasement effort.
The financial sanction for the restructuring proposal would
be separate as per extant delegation of financial powers. If
after the structured review, the unit is not considered
potentially viable, recovery efforts are to be immediately
initiated. The reviewing authority would give necessary
directions to the effect.
vii. Time Norms :
The speed with which problems are diagnosed and the
package is implemented is vital to the success of any
restructuring plan. Similarly, in cases where restructuring
is not considered feasible, the speed with which recovery
steps are initiated is equally critical. Accordingly and
keeping in view the 90 day IRAC norm, the following
revised time norms may be followed for review of stressed
assets and for obtaining sanction for rehabilitation package
:
Process Time
frame*
Submission of SAR Report 10 days
Approval for action plan (by reviewing authority) 05 days
Completion of viability study, if necessary and for
submission of restructuring / rehabilitation
package and obtaining of sanction from
sanctioning authority
45 days
TOTAL 60 days
*Time frame from turning account in IRAC status 1 in respective category
Saurashtra Gramin Bank NPA Management Policy Page 16 of 36
viii. After first reporting of stressed assets, if account continues
to remain irregular, review of such stressed assets should
be done at least on quarterly basis till account becomes
regular or final outcome occurs.
ix. Monitoring by Controllers :
The controller (RM/GM/Chairman) is to monitor the
progress in implementation of the approved action plan
and subsequent restructuring. A monthly progress report
may be submitted by the Branch to the controller as per the
format given in Annexure-3.
8.5. Holding on Operations :
i. Holding on operations would commence from the date
branch identifies as SMA – Category I & II or a Sub-
standard account as „potentially viable‟. (Such holding on
operations would not require any Administrative
Clearance / approval / sanction and would need to be
only reported as per the Report format being laid down.)
ii. The prescribed reviewing authority would take the report
on commencement of holding on operations on record and
give necessary directions to the branch on the proposed
action plan.
iii. The holding on operations would consist of freezing the
bank‟s exposure at the sanctioned limit or average daily
exposure during the previous one month prior to the date
of reporting. Whichever is higher and allowing operations
such frozen limit. However in cases like willful defaulter,
diversion of fund etc., normally, no withdrawal should be
allowed and efforts should be made to reduce our
exposure.
iv. Holding on operations may in deserving cases continue for
a maximum period of three months from the date of
identification of SMA. Category I & II or a Sub-standard
account as „potentially viable‟ and for a maximum period
of one month from the date of approval of the restructuring
package. (The 4 months period is being prescribed as the
outer limit for holding on operations in larger accounts.
Ordinarily, the branches should endeavor to strictly
complete the review and restructuring exercise within 60 to
90 days in view of the current IRAC norms.)
Saurashtra Gramin Bank NPA Management Policy Page 17 of 36
8.6. Review of Doubtful Loss assets / AUCA :
( I ) Coverage :
(i) Doubtful / Loss assets / AUCA being generally
considered, amenable to any rehabilitation efforts, these
assets should be clubbed so that the focus of the review
will shift entirely to various means of recovery, i.e. legal
action, compromises, assignment of decree, etc. AUCA is
also included for structured review, as recovery efforts in
these accounts may not have been fully exhausted.
(ii) Further, there may be accounts which have deteriorated
to Doubtful / Loss asset category due to mere passage of
time and not due to deterioration of security and are still
viable. In such cases also, restructuring should be
examined as the first option. Review may be put up in
format as given in Annexure-5.
(iii) Cut-off point : (Rs. 3 lacs and above Outstanding)
(Accounts below the cut-off level may not be covered by
the, structured reporting norms. However, in these cases,
branches would formulate and pursue the account specific
action plans, as hitherto, with the approval of the
sanctioning authority. In addition, all accounts above Rs. 1
lac but below Rs. 3 lacs may be reported monthly, on a
consolidated basis by the branches to the controller for
purpose of monitoring. The Controllers may also put in
place a suitable structured review of these accounts (Rs. 1
lac to Rs. 3 lacs), taking into account the local situation and
requirements).
(iv) Reviewing Authority :
The authority structure for review of Doubtful/ Loss/
AUCA. Assets would be as under ;
Br No. To be Monitored
by
Cut off point for accounts with
Outstanding of
01 Branch Manager * Account upto Rs. 3.00 lacs
02 Regional Manager Above Rs. 3.00 lacs and upto 10.00
lacs
03 General Manager Above Rs. 10.00 lacs and upto 20.00
lacs
04 Chairman Above Rs. 20.00 lacs
*This will not be a part of structure reporting and after reviewing
such accounts at branch level, a consolidated monthly report will
have to be submitted to the respective controllers.
Account below the cut-off level are not covered by the formal
reporting. However, in these cases, branches and their controller
Saurashtra Gramin Bank NPA Management Policy Page 18 of 36
would formulate and pursue the account specific action plans as
hitherto.
Doubtful / Loss assets may also be considered for restructuring,
subject to their viability.
The existing authority structure prescribed for removal of entries
from AUCA would continue separately.
8.7. Rationale for the above integrated approach :
The primary intent behind the new integrated approach detailed
above is to ensure that a SMA does not slip to sub-standard or a sub-
standard account to Doubtful /Loss category due to lack of timely
finance or reliefs / concessions. The first step to achieve this objective
would be to identify stressed assets quickly and to determine whether
the problems are of the temporary nature or whether they are likely to
persist and affect the asset quality if proactive action is not taken. The
restructuring plan thereafter should be aimed at units whose intrinsic
liability is beyond doubt and which have genuine cash flow problems
and which have defaulted for reasons beyond their control. It may be
ensured that only borrowers with genuine intent to restructure the
units are supported. The Management‟s ability to turnaround the unit
would also be a critical consideration.
The integrated approach being introduced is expected to bring greater
focus on review of stressed assets so as to quickly identify accounts
amenable to restructuring. The Bank‟s policy would be that in cases
where restructuring is considered feasible, branches would consider
restructuring as the first option in management of stressed - assets. To
give the desired thrust to restructuring across the Bank, a uniform
approach to holding on operations and relief / concessions, but with
necessary in-built flexibility is being put in place. It is also expected
that wherever restructuring is not considered feasible on account of
non-viability or any other Reason, the branches would quickly
consider exit option or the usual steps for recovery.
8.8. Relief and concessions – a uniform approach :
Extension of RBI norms on relief and concessions to weak / sick SSI
units to potentially viable units in other sectors :
Given the RBI‟s simple and easily implementable approach to relief /
concessions, the some may be extended across the Bank to various
categories of advances as given below :
(i) In SSI sector, units falling within the RBI‟s definition of a sick
SSI unit would continue to be eligible for relief and concessions
as per RBI guidelines. SSI units which do not readily fall within
the RBI‟s definition of sick SSI unit may also be extended relief
and concessions as per RBI guidelines (details are given in
Saurashtra Gramin Bank NPA Management Policy Page 19 of 36
Annexure-4) if they require immediate support through
restructuring etc. to retain their viability. In other words,
complying with the RBI‟s definition of a sick SSI unit need not
be necessarily reckoned as pre-condition for extending holding
on operations and rehabilitation / restructuring with relief and
concessions to otherwise deserving SSI units.
(In all cases above, relief and concessions as per RBI guidelines
may also be extended to SMAs)
(iii) Though RBI‟s norms for relief and concessions to potentially
viable units are primarily intended for manufacturing units,
non-manufacturing sectors such as Trade & Service, Small
Business and Personal Segment may also be considered for
rehabilitation / restructuring. In such cases, rescheduling of
term loans, if any, and / or stipulating repayment /
regularization programme in cash credit facility would
generally suffice. Interest concessions may be extended only
highly selectively.
(iv) For rehabilation of seek MSE Units, Bank have formulated MSE
Rehabilation Policy (Head Office Circular CRD/36 dared
17.07.2015)
9. Recovery through compromise with borrower : Compromise Settlement.
9.1. Compromise settlement refers to a negotiated settlement where a borrower
offers to pay and the Bank agrees to accept in full and final settlement of its
dues, an amount less than the total amount due (total dues as per loan
contract and other charges upto the date of compromise, i.e. interest to be
calculated at contracted rate or as per decree) to the Bank under the relative
loan contract. Thus, the settlement invariably involves certain sacrifice
(total dues minus offer) by the Bank (by way of write-off and/or waiver) of
a portion of its dues.
The Policy recognizes that it is not possible to lay down precise
guidelines which can be followed uniformly in all compromise offers as
each offer is unique in the context of circumstances necessitating its –
consideration as a recovery option. The Policy reiterates principles which
are to be kept in view while compromise offers are accepted.
There are several cases where the borrower / guarantor themselves Come
forward to settle the Bank‟s dues to avoid botheration of prolonged legal
proceedings. Some time we also encourage offers from the debtors to pay
of the Bank‟s due through compromise.
Saurashtra Gramin Bank NPA Management Policy Page 20 of 36
9.2. Approach to Compromise :
(i) Bank‟s approach to compromise as a recovery option will be
based on an analysis of the strengths and weaknesses in a given
case. The parameters for such an analysis are as under ;
a. Genuineness of the Borrower
b. Quality of Assets charged and Collateral Cover
c. Means of Borrower & Guarantor‟s
d. Stage of legal action
(ii) Hence, compromise proposals may be considered in cases where
a. Genuine economical problems of Borrowers
b. Security position is weak
c. Title / documents are defective
d. Realizable value of assets are declining
e. Difficulties anticipated in realizing the assets
f. Business activity is closed and rehabilitation is not possible.
g. Legal recourse is time consuming.
9.3. Bank may organize One Time Settlement Camp (Samadhan Camp) for
reduction of NPA amount through compromise or One Time Settlement
Scheme for small borrowers financed under Government Sponsored
Scheme & others than Govt. Sponsored Scheme on the line of RBI
guidelines.
9.4. For the purpose of compromise in One Time Settlement Camp (Samadhan
Camp), Regional Manager should appoint a officers for this camp. Branch
Manager and officer appointed by Regional Office will constitute
committee for compromise camps. One among two committee member
would be of scale – III. Senior officer among two will be head of committee.
Competent Authority may devise Compromise formula for compromise in
One Time Settlement Camp (Samadhan Camp) and also delegate powers for
compromise settlement to this committee.
9.5. The Bank branches should go for vide publicity of the Scheme and also
give notice to the eligible defaulting borrowers to avail the opportunity for
One Time Settlement of their outstanding dues in terms of RBI guidelines.
9.6. Further, As advised by the Sponsor Bank, Bank have constitutes new
committees with nomenclature Head Office Credit Write Off Committee
(HOCWC). Discretionary Powers for write off of Bad Debts may be
decided by Competent Authority time to time.
9.7. All compromise proposals will clearly spell out the basis on which the
negotiated amount of settlement has been arrived at.
9.8. The quantum of sacrifice involved in a compromise offer per-se would not
hinder consideration of the offer. The opportunity cost of funds locked up
in the loan will be a significant factor. The opportunity cost of funds in
hand vis-à-vis that of funds, which could be in hand at a later period, will
be calculated to establish the comparative advantage of “Now or Later”.
Saurashtra Gramin Bank NPA Management Policy Page 21 of 36
9.9. Documentation & Legal Formalities:
After concluding the compromise arrangement, the settlement will be
documented as appropriate as per legal requirement.
(a) In respect of suit filed cases, which have so far not been decreed, the
compromise should be put through in the form of consent decree
through appropriate court so that decisions remain binding on
borrower / guarantor and in the event of default, decree can be
executed.
(b) In cases other than mentioned in 9.6 (a) above, the compromise
settlement should be well documented in legal terms and all the parties
concerned including guarantors should sign the agreement so as to
keep the documents alive and to have a legal recourse in case the terms
of compromise are not adhered to by the parties concerned. It should
also be mentioned clearly in the agreement that Bank will be free to
withdraw all the concessions agreed to on failure / non adherence of
the terms of the agreement and can sue the parties concerned.
(c) Where amount is to be paid in installments, and where release of some
securities and/or extension of some other relief/concessions are
involved, it is necessary to have the following irrevocable provisions in
the Bank‟s favor, (incorporated in consent decree/ compromise
proposal) in the event of default in meeting compromise commitment
on the part of borrower / guarantor :-
i. Entitlement of the Bank to recover the entire balance due, without
further notice to the borrower / guarantor.
ii. Withdrawal of all remissions granted in respect of interest, legal
charges, penal interest liquidated damages etc.
9.10. EXCLUSIONS :
a. Compromise proposals involving willful default, fraud and
malfeasance should not be entertained.
Note: However, whether “willful” default has been recorded as reason
for default, it may be reviewed to decide whether the default is actually
“willful” so as to ensure that the opportunity for compromise is not
denied to such borrowers. Such a review is considered necessary
against the backdrop of the fact that in the past, practically all NPA
accounts used to be branded as “willful” defaulters, as a routine while
transferring the account to the PB account. It is necessary that on
review, the authority (Branch Manager, Regional Manager, Controller
etc. as the case may be having the powers to sanction the loan) is
convinced that the default is not “willful” and it is recorded so.
Saurashtra Gramin Bank NPA Management Policy Page 22 of 36
b. However, if any compromise proposal is accepted with such
defaulters, compelling reasons for agreeing to the same should be
recorded.
9.11. RELIEFS :
Following relief and concessions may generally be considered on a case to
case basis :-
a. Waiving of penal interest partly / fully, if charged.
b. Charging of interest / concessionary rates from date of transfer to PB
account or date when unit started incurring cash losses or date of
closure of business activities.
c. Partial or complete waiver of interest charged after the unit ceased
functioning.
OR
Partial or complete waiver of interest charged after the unit became
sick.
d. Waiver / Sacrifice of a part of Principal, which is justifiable on the basis
of the analysis of the strength / weaknesses mentioned in Part-I and II
above. However, such justification should clearly be spelt out in the
proposal.
9.12. REPAYMENT :
a. The repayment should ordinarily be in one lumpsum.
b. Where recovery of entire amount in one lumpsum is not feasible,
amount may be recovered in installments within a period of 12 months
normally. Extension in the repayment period may be allowed by the
competent authority on the basis of merit of the case.
9.13. PROCEDURAL ASPECTS :
a. Each compromise proposal is required to be examined and
recommended by Branch Manager before the same is put to up to
appropriate sanctioning authority for sanction. The authority
approving the compromise will not be the one who sanctioned the
advance in question in his individual capacity. While ascertaining
appropriate sanctioning authority for considering a compromise, the
total dues should be notionally reworked out applying rate of interest
(compounded) with effect from the date of account becoming NPA.
Such reworked out total dues should be taken into account to decide
appropriate sanctioning authority as per structure of power of
delegation.
b. Approved compromise proposals should be properly reported to the
next higher authority for review.
c. It is presumed that the aspect of staff accountability in each case would
have been examined. However, in case it is not done, it should not hold
Saurashtra Gramin Bank NPA Management Policy Page 23 of 36
up the process of the compromise settlements. The same should be
examined within a reasonable time.
9.14. CANCELLATION :
If the compromise proposal is not implemented as per terms of
compromise settlement within 6 months from the date of sanction, the
same will be treated as cancelled.
10. Recovery through Legal Process :
Litigation will normally be resorted to after ensuring that prospects for
Recovery through litigation are strong and the action will be cost effective.
10.1. Recalling up of advances and filing of civil suits / application under
GPMR/ GAC Act for Recovery of dues.
If it is not possible to recover the Bank‟s dues normally or through a
mutually acceptable compromise settlement it is better to recall the
advance at an early stage instead of waiting for a long time. Undue
delay may result in deterioration of the security available. Further if it
is not possible to sell the security without court order civil suits may be
filed in the court of low or recovery application be filed under the
Gujarat Public Money (Recovery of dues) Act, 1979 or the Gujarat
Agricultural Credit (Provision of facilities) Act, 1981 as the case may
be.
10.2. Monitoring of suit file/ GPMR/ GAC Cases :
The status of each suit filed / GAC & GPMR case accounts at branches
shall be reviewed by the Branch Manager at quarterly interval in
consultation with the advocate / revenue authority concerned. Report
thereof be submitted periodically to Region Office / Head Office.
10.3. Filling execution petition and monitoring Decreed cases:
In case where decree has been awarded in our favour execution
petition should be filed at the earliest. In case of any difficulty in filing
execution petition branch should immediately refer to Region Office /
Head Office.
11. WRITING OFF OF BAD DEBTS:
11.1. Policy for Write-off of NPAs and Transfer of Protested Bills Accounts
to Advances under Collection Account (AUCA) :
The policy for write-off of NPAs and transfer of protested bills
accounts to Advances Under Collection Account is detailed as follows:
I. COMMON PARAMETERS:-
(a) While seeking approval from the appropriate authority for write-
off of the outstanding in any account, it should be generally
Saurashtra Gramin Bank NPA Management Policy Page 24 of 36
ensured that accounts should be in Protested Bills, IRAC status D3
or Loss, fully provided.
(i) The appropriate authority has taken a decision regarding
the initiation of legal action and suit/recovery
proceedings have been filed, wherever ordered.
(ii) The accounts are otherwise eligible for write off as per
approved policy.
(iii) Doubtful and Loss assets held in live ledgers should be
first transferred to Protested Bills account and then
written off, with the approval of the appropriate
authority.
(iv) The exercise of examination of staff accountability is
either completed and a final view has been taken by the
competent authority or the process of examination of staff
accountability has been initiated and is likely to be
completed in the next two months.
(v) For all Write-off accounts, Advance Under Collection
Account (AUCA) to be opened in CBS System and Write-
off amount should be parked in AUC account. It is to
ensure proper follow-up and also to continue the suit /
recovery proceedings. For not parking Write-off amount
in AUCA, proper justification to be given and permission
for not parking Write-off amount in AUCA should be
obtained from the General Manager at Head Office.
(b) Where write-off is justified based on the parameters contained in
the Policy, even though full provision has not been made, such
cases can also be considered for write-off with the approval of
appropriate authority.
(d) The outstanding in the Protested Bills Account (prior to crediting
therein the amount of Subsidy from any agency,
DICGC/ECGC/CGTMSE claim settled and amount held in
Interest on NPA Account) should be transferred to Advances
Under Collection Account. The contra voucher for the Branch
General Ledger should also be passed for above amount.
(e) The outstanding in the Protested Bills proforma Account, with
interest computed and recorded upto the date of transfer of the
Account to AUCA, must be shifted to AUC proforma Account.
Please note that this is very important because such computation
and record will be very relevant at the time of Finally Dropping
off of the Account from AUC, since the powers delegated for Final
Drop-off of the Accounts from AUC are related to such
computation only.
Saurashtra Gramin Bank NPA Management Policy Page 25 of 36
(f) In deserving cases, write off of bad loan accounts where
compromise is settled may also be considered.
11.2. Policy of Advances Under Collection Accounts (AUC) : for Follow up ,
Review and Final Drop off :
Write-off of the accounts is permitted on certain conditions in
terms of the NPA Management Policy. It is also permitted that all
Protested Bills accounts may be parked in Advance Under
Collection (AUC) account. Such accounts when transferred to
AUC are further followed up for recovery without any laxity or
let up. As per the existing instruction, the AUC account should be
allowed to continue till the eventual outcome of the legal
proceedings is known. However, non parking of Write-off
amount in AUCA or reversal of AUCA amount without recovery
to be permitted by General Manager at Head Office.
12. BUDGETING FOR NPA MANAGEMENT / AUC RECOVERY :
12.1. Along with annual budgeting for Profit and business under various
heads, a system of budgeting for NPA management/ AUC account
recovery will be put in place. The objectives of this exercise will be :-
(i) Achieving targeted standard assets ratio by containing fresh
accretion of NPAs.
(ii) Achieving targeted reduction in NPAs/AUC Accounts obtaining
as at the beginning of the year.
(iii) Review of recovery at quarterly intervals with controllers.
(iv) Budget will be settled branch-wise and account-specific for NPA
reduction as well as AUC Account recovery.
(v) Budgeting exercise will include preparation of branch-wise
annual action plan for recovery / reduction of NPAs and
reduction of outstanding NPA Interest account, recovery of
undebited interest recorded in the mirror Account besides
recovery of advances earlier written off and held in Advances
Under Collection Account.
13. STAFF ACCOUNTABILITY :
While staff accountability will be handled as an administrative issue, the
status of examination of the same will not be a consideration while taking
decisions covering rehabilitation of units, or compromise settlements or write-
off of loans. Where staff accountability has not been examined, it should be
ensured that the same is completed expeditiously within a time frame. Staff
accountability provisions should comply directives of RBI in this behalf.
Saurashtra Gramin Bank NPA Management Policy Page 26 of 36
14. Guidelines for Compromise settlement of dues of the Bank through Lok
Adalats.
The Lok Adalat has been given legal status through chapter VI of the „Legal
Services Authorities Act, 1987‟ and has jurisdiction to determine and to arrive
at a compromise or settlement between the parties to a dispute in respect of
any case pending before the court or any matter which is falling within
the jurisdiction of and is not brought before any court.
The Lok Adalat disposes the case or the matter and arrives at a compromise or
settlement between the parties. The compromise / settlement arrived at the
Lok Adalat is documented in the form of an Award and shall be deemed to be
a decree of a Civil Court.
There are certain advantages in using the forum of Lok Adalat by Banks and
Financial Institutions. There are no court fees involved when fresh disputes
are referred to it. It can take cognizance of any existing suit in the court as
well as look into and adjudicate upon fresh disputes. If no settlement is
arrived at, the parties can continue with the Court proceedings. Its decrees
have legal status and are binding upon the parties concerned.
The value of security, the repaying capacity of the borrowers / guarantors
and cost of recovery etc. as set out in the compromise criteria at the material
time will continue to be the basic parameters to be applied to the cases falling
within the purview of the Lok Adalats.
14.1. Delegation for sanction:
Since the Lock Adalats settle cases on the spot and the objective of the
whole exercise is to settle pending cases expeditiously, the suggestion
of the Presiding Officer of the Lok Adalats should be responded to pro-
actively. With a view to ensuring prompt disposal of cases higher
powers to the Regional Manager and Branch Managers
(Branch/Regions) for writing off/waiver of the Bank‟s dues under this
Scheme. Competent Authority may delegate powers for settlement
through Lok Adalat.
As per the delegation of powers applicable for write-off/forgo, the
Branches will require to obtain PRIOR mandate of the competent
authority on the amount of settlement, sacrifice, write-off etc. so that
the officer representing the case in Lok Adalat can accept the
compromise on the spot.
14.2. Other important Points :
(a) A decree should be sought from the Lok Adalat for the principal amount
and interest claim in the court and after full payment of the decree
amount, a discharge certificate should be issued by, the Bank.
Saurashtra Gramin Bank NPA Management Policy Page 27 of 36
(b) The negotiated agreement with the borrower should contain a default
clause in terms of which if the borrower does not pay the installments
due regularly, within the repayment period, the entire debt will fall
due for payment and bank may initiate legal proceedings.
SGB Samadhan Manch: It will be operative through out the year in the
line of Lok Adalat. It will accept cases through out the year from the
branches. Any NPA account or any stressed account even if in live ledger
can be put up for compromise or Samadhan.
15. Disposal of assets in NPA A/c. under decree.
Assets in Bank‟s charge can be disposed off under Execution of Decree of
Court and the Bank may also consider disposal of assets in NPA account
with the consent of the borrower /guarantor and concerned court or even
if suit is not decreed.
The System to be followed is as under:
(1) Such disposal of assets may be in full or in part (i.e. for total
set of assets or in part- i.e. one or more assets out of total
assets charged)
(2) Reviewing authority of the captioned account (i.e. one step
higher authority than the Sanctioning Authority of the
account) can approve the deal.
(3) Disposal of assets may be as under :
(a) Public auction - Assets should be disposed off in
favor of highest bidder.
(b) Inviting tender - Assets should be disposed off in
favor of highest bidder.
(c) Through Private - This option should be adopted
Treaty only for those assets
which are having valuation of
Rs. 5.00 lacs and below as per
latest approved valuer report.
(4) While deciding sale price of the assets to be disposed off, if
needed, the latest valuation report to be obtained from bank‟s
approved valuer and meaningful market inquires regarding
the value to be made with aim of getting maximum price. To
expedite sale of assets, criteria prescribed by Competent
Authority time to time in accordance with guidelines of
Reserve Bank of India should be followed.
(5) The amount recovered should be credited fully to the NPA
account
(6) In case of SARFAESI and Seizure actions, guidelines of
SARFAESI Act and other instructions issued by Bank time to
Saurashtra Gramin Bank NPA Management Policy Page 28 of 36
time should be followed in case of SARFAESI and Seizure
cases.
(7) In all NPA cases where immovable property is mortgage with
Bank as security, SARFAESI notice should invariably issued.
16. Appropriation of recovery in NPAs
Except the cases of clear agreements with the borrowers (i. e. the accounts
wherein repayment in Equated Monthly Installments (EMI) is stipulated or
accounts wherein principal is to be recovered first like staff housing / vehicle
/ consumer loan etc.) or where the terms for appropriation of recoveries are
specified like in compromise proposal approved, the Bank has adopted
following policy, for appropriation of recovery in NPA accounts in view of no
specified directives by RBI:
ITEM
01 In case of NPA accounts in live ledger :
Though the recoveries are necessary routed through the account, the outstanding in
„Interest on NPA account‟ and „Mirror account‟ are also appropriated
simultaneously indicating that unrealized interest (whether debited (INCA/UIPY)
in the account or not(Accrued Interest)) is appropriated first and remaining, if any,
towards principal.
02 In case of accounts in Protested Bills :
(i) Though the recoveries are necessary routed through the PB A/c. the
outstanding in „Interest on NPA A/c.‟ is also appropriated simultaneously,
indicating that unrealized interest (which is already debited to the account) is
appropriated first with simultaneous effect on the P.B. Proforma account, in case of
non-suit filed cases.
(ii) Recoveries thereafter are credited to the Protested Bills account till it is
liquidated, barring retaining a small outstanding (say Rs. 10.00 or so) in the P.B.
A/c. with simultaneous effect on the P.B. Proforma account.
(iii) Recoveries thereafter, though routed through the P.B. Proforma account, are
taken directly to respective Income or Expenditure A/c.
Exception:
Where, however, clear agreement between the bank and the borrower for the
purpose of appropriation of recoveries in NPAs (i.e. Principal or interest
dues) is made, bank will continue to act according to the terms of agreement.
17. Other Relevant Policies of Bank :
a. Bank‟s Loan Policy (Head Office Circular CRD/90 dared
01.02.2016)
b. MSE Rehabilation Policy of the Bank (Head Office Circular CRD/36
dared 17.07.2015)
18. Review of NPA position to the Board :
Bank will prepare a review of NPA advances, at quarterly intervals
and put to the Board for information.
**************************
Saurashtra Gramin Bank NPA Management Policy Page 29 of 36
Annexure - 1
WARNING SIGNALS:
(a) Delay in submission of stock statement/ other control statements
/ financial statements.
(b) Return of cheques issued by borrowers. Non-payment within a
reasonable period
(c) Frequent non-payment within a reasonable period.
(d) Return of cheque discounted
(e) Non-payment of bills discounted or under collection.
(f) Poor financial performance in terms of declining sales and profits,
cash losses, net losses, erosion of net worth etc.
(g) Incomplete documentation in terms of creation / registration of
charge / mortgage etc.
(h) Non-compliance of terms and conditions of sanction
(i) Persistent irregularity in account.
(j) Default in Repayment obligation
(k) Lower Credit summations in the account.
(l) Opening of accounts with other bank without knowledge of Bank
(m) Operating losses / Net losses
(n) Erosion of tangible net worth
(o) Low activity level‟s
(p) Disposal of assets
(q) Closure of the business
(r) Migration.
(s) Diversion of fund
(t) Avoids contract with the Bank.
(u) Adverse change in Government Policy.
Saurashtra Gramin Bank NPA Management Policy Page 30 of 36
Annexure - 2
Stressed Asset Review Report
Category I & II SMAs and Sub-standard Assets
REGION: BARNCH: BRANCH CODE:
INDUSTRY: (Rs. in lacs)
1. Name & Address of the Company/
Borrower :
2. Date and Amount of limit sanction :
3. Purpose & segment :
4. Amount outstanding :
5. Date of identification as SMA / :
Sub-standard.
If SMA: category thereof :
6. Banking with us :
7. Present exposure
Date of last renewal :
Continuation valid up to :
08 Financial arrangement: Multiple banking / Sole Banking / Consortium
Indebtedness Existing Proposed Name of the Bank Share (%)
Fund based S.G.B.
Non-Fund Based Others
TOTAL TOTAL
Limits (position of accounts as on __________________ )
Fund based Limit Drawing
power
Outstandings Irregularity
CC
WCDL
Book debts / others /
TL
TOTAL FB
Non-fund based
LC (inland/import)
BG
Total NFB
Total FB + NFB
Performance & Fin.
Indicators as on
Net Sales
PBT
Pbt / Net Sales (%)
TNW
TOL / TNW
Current Ratio
Other Group Companies Dealing with Saurashtra Gramin Bank – Brief details
thereof ;
Cont..2..
Saurashtra Gramin Bank NPA Management Policy Page 31 of 36
(2)
Name of Company FB Limit NFB Limit CRA IRAC Date of last renewal / sanction
BRIEF REASONS FOR THE UNIT BECOMING SUB-STANDARD / FOR IDENTIFYING
THE ACCOUNT AS A SMA :
WHETHER THE PROBLEMS ARE OF A TEMPORARY NATURE OR ARE LIKELY TO
AFFECT THE ASSET QUALITY, IF PROACTIVE ACTION IS NOT TAKEN ( Clear
rationale to be given ) :
COMMENTS ON VIABILITY (Give specific reasons, why you consider the unit need to
be supported through restructuring)
IMMEDIATE ATION PLAN ( Holding on operations (where already commenced, detail
may be indicated), need for feasibility study, time frame for submission of detailed
restructuring plan to the appropriate authority etc.)
SECURITY POSITION :
Description Estimated realizable
value
Date of last valuation on
/ review of the means
(a) Primary
(b) Collateral
RECOMMENDATIONS :
BRANCH MANAGER
Saurashtra Gramin Bank NPA Management Policy Page 32 of 36
Annexure - 3
Stressed Assets Review
Progress Report for the month ended
(To be submitted in duplicate)
1. Name of the borrower :
2. Refer SAR dated :
3. Holding on operations commenced from :
4. Position of accounts :
(Rs. in lacs)
Facility O/s. when the
implementation of the
Corrective action
Commenced
O/s. as at the end of
Previous month /
Quarter
O/s. as at the end of
The current month /
Quarter.
5. Comments on the progress in the implementation of the corrective action
indicate whether the rehabilitation proposal has been finalized / submitted /
sanctioned.
6. If rehabilitation proposal has been approved, implemented since :
7. Brief comments on progress / impact of the package etc.
DATE : ___________ Field Officer / Manager Branch Manager
Observation of the Controllers :
REGIONAL MANAGER
Saurashtra Gramin Bank NPA Management Policy Page 33 of 36
Annexure 4
Relief and Concessions which can be extended
To Potential Viable Units under Rehabilitation
(RBI guidelines for sick SSI units suitably adopted for implementation across the Bank)
The viability and the rehabilitation of a sick SSI unit would depend primarily on the unit's
ability to continue to service its repayment obligations including the post restructured debts.
It is, therefore, essential to ensure that ordinarily there is no write
Off or scaling down of debt such as by reduction in rate of interest with retrospective effect
except to the extent indicated in the guidelines. The guide lines on various parameters on
reliefs and concessions are given below.
i) Interest Dues on Cash Credit and Term Loan:
If penal rates of interest or damages have been charged, such charges should be waived
from the accounting year of the unit in which it started incurring cash losses continuously.
After this is done, the unpaid interest on term loans and cash credit during this period
should be segregated from the total liability and funded. No interest may be charged on
funded interest and repayment of such funded interest should be made within a period not
exceeding three years from the date of commencement of implementation of there
habilitation programme.
ii) Unadjusted Interest Dues:
Unadjusted interest dues such as interest charged between the date upto which
rehabilitation package was prepared and the date from which actually implemented, may
also be funded on the some terms as at (i)above.
(iii) Term Loans
The rate of interest on term loans may be reduced, where considered necessary, in the case
of tiny / decentralized sector units and other SSI units.
iv) Working Capital Term Loan (WCTL)
After the unadjusted interest portion of the cash credit account is segregated as indicated at
(i) and(ii) above, the balance representing principal dues may be treated as irregular to the
extent it exceeds drawing power. This amount may be funded as Working Capita Term
Loan (WCTL)with a repayment schedule not exceeding 5 years. The rate of interest
applicable would be normal rate to all sick SSI units including tiny and decentralized units.
(v) Cash Losses
Cash losses are likely to be incurred in the initial stages of the rehabilitation programme till
the unit reaches the break-even level. Such cash losses excluding interest as may be incurred
during the nursing prograrrme may also be financed by the bank of the financial institution,
if only one of them is the financier. But if both are involved in the rehabilitation package, the
financial institution concerned should finance such cash losses. Interest may be charged on
the funded amount at Normal rate.
Saurashtra Gramin Bank NPA Management Policy Page 34 of 36
Future cash losses in this context will refer to losses from the time of implementation of the
package upto the point of cash break-even as projected. Future cash losses as above ,should
be worked out before interest on working capital etc., due to the banks and should be
financed by the financial institutions. The interest due to the bank should be funded by it
separately. Where, however, Saurashtra Gramin Bank alone is the financier, the future cash
losses including interest will be financed by it. The interest on the funded amounts of cash
losses / interest will be at normal rate.
(vi) Working Capital :
Interest on working capital may be charged at normal rate. Additional working capital limits
may be extended at same rate as per limit.
(vii) Contingency Loan Assistance
For meeting escalations in capital expenditure to be incurred under the rehabilitation
programme, the banks may provide, where considered necessary, appropriate additional
financial assistance upto 15 percent of the estimated cost of rehabilitation by way of
contingency loan assistance. Interest on this contingency assistance may be charged at
normal rate.
[viii) Funds for Start-up Expenses and Margin for Working capital
There will be need to provide the unit under rehabilitation with funds for start-up
expenses(including payment of pressing creditors) or margin money for working capital in
the form of long-term loans. Where a financial institution is not involved, banks may
provide the loan for start-up expenses at a normal rate.
(ix) Promoters' Contribution
As per the extant RBI guidelines, promoter's contribution towards the rehabilitation package
is fixed at a minimum of 10 percent of the additional long-term requirements under the
rehabilitation package in the case of tiny sector units and at 20percentof such requirements
for other units. In the case of units in the decentralized sector, promoter's contribution may
not be insisted upon. In line with the RBI guidelines, the Bank may stipulate a higher
promoters' contribution where warranted. At least 50 percent of the above promoters'
contribution should be brought in immediately and the balance with in six months. For
arriving at promoters' contribution, the monetary value of the sacrifices from banks together
with financial institutions and Government may be taken into account, in addition to the
long- term requirement of funds under the rehabilitation package.
(x) Right of recompense
While evolving packages, it should be made a precondition that the promoters should bring
in their contribution within the stipulated time frame. Further, in regard to concessions and
relief made available to sick units, banks should incorporate a 'Right of Recompense' clause
in the sanction letter and other-documents to the effect that when-such units turn the corner
and rehabilitation is successfully completed, the sacrifices undertaken by the Bank should be
recouped from the units out of their future profits/cash accruals.
***********************************
Saurashtra Gramin Bank NPA Management Policy Page 35 of 36
Annexure – 5
SAURASHTRA GRAMIN BANK
HEAD OFFICE : RAJKOT
PROFILE OF INDIVIDUAL NPA ACCOUNTS (DOUBTFUL / LOSS) AND AUC
ACCOUNTS WITH OUTSTANDING OF Rs. 3.00 LACS AND ABOVE FOR
THE MONTH ENDED _______________________
Whether suit filed
Whether willful defaulter
01 Name of the Branch
02 a) Name and address of the borrower
(Registered office in case of corporate
borrowers)
Telephone Nos..
b) Names of partners / directors
c) Date of Original Sanction
03 Constitution
04 Line of activity
05 Market Segment
(C&I / SSI/SBF/P & SB)
06 Date of NPA
07 IRAC Status
08 a) Consortium leader (if any) and its
classification
b) Names of other member Banks / FIs
financing the unit
09. Credit facilities (Rs. in lacs) Nature of the
facility
Date of last
sanction
Limit
sanctioned
Balance
O/S. as on
Interest on
NPA Account
Remarks
Fund Based
TOTAL
Non-Fund Based
TOTAL
Grand TOTAL
IRAC Status
W.E.F.
Saurashtra Gramin Bank NPA Management Policy Page 36 of 36
(2)
10. Details of securities : (Rs. in lacs)
Nature of Security
(Residential/commercial, Address, Ownership, Plot No. S. No.,
Shop No. etc.)
Value Date of
Valuation
(i) Primary
(ii) Collaterals :
11. CGTMSE / ECGC coverage :
12. Provision required as on :
13. Outcome of examination of staff accountability :
14. Brief history with reasons for account turning NPA :
15. Recoveries during the month
16. a) In the case of Protested Bills A/cs. / AUC
A/cs,
P.B. Ac. AUC A/c.
i. Date of transfer to PB / AUC
ii. Date of suit filed
iii. Date of decree
iv. Present position of the suit
b) In case suit is not filed, whether the
documents are Current / Enforceable /
Valid
17. Remarks and steps taken for up gradation / recovery & comments on viability of
the unit :
18. Status and impact of rehabilitation proposal if approved and implemented :
19. Development during the last month :
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